Oil prices swung wildly amid fears that the new wave of European lockdowns will hit demand for fuel this winter.
Brent crude fell by as much as 5 per cent to $35.74 a barrel – its lowest level since May – after the UK followed France and Germany by announcing Covid measures in England that will come into effect on Thursday.
Analysts believe rising infection rates in Spain and Italy mean they could soon introduce similar policies.
Brent crude fell by as much as 5 per cent to $35.74 a barrel after the UK followed France and Germany by announcing Covid measures in England that will come into effect on Thursday
The new restrictions on overseas and non-essential domestic travel have intensified fears that demand for petrol and jet fuel will drop again and leave the oil market with a glut of spare crude.
There are also concerns the lockdowns will send western European economies into a double-dip recession.
But on a rollercoaster day on the oil markets, crude later rose back above $39 a barrel on speculation the Opec+ countries would curb production to prop up prices.
The volatility comes as traders are jittery about the prospect of Democrat Joe Biden winning today’s US election, which could release lots of Iranian oil into the market. Biden has also promised to ‘transition from the oil industry’ as part of his plan to switch to green energy.
The latest falls mean oil prices are down by more than 10 per cent since mid-October and are now back to lows not seen since late May
The comments were praised by environmentalists but seized on by Trump who urged voters in energy-producing states to take note.
The latest falls mean oil prices are down by more than 10 per cent since mid-October and are now back to lows not seen since late May, when the market was recovering from huge lockdown-inspired falls during March and April.
Cailin Birch, global economist at the Economist Intelligence Unit, said: ‘Market concerns that developed economies are heading for a potential double dip recession are the main factor weighing on oil prices.’
A barrel of Brent crude was valued at almost $70 in January – but prices fell as low as $19 as government measures to contain the spread of the coronavirus across the world grounded planes, took cars off the road and closed factories.
Industries will not be shut down this time, but the transport curbs could mean 2m barrels of oil a day less are consumed.
Joe Biden (left) has said he would be keen to revive the nuclear treaty with Iran, which was sealed during the Obama administration and later ditched by President Donald Trump (right)
The price drops will pile more pressure on the balance sheets of major oil companies such as BP and Shell, which have slashed their prize dividends in the wake of the price falls. Analysts are also concerned about the effect a Biden win in the US election could have.
Biden has said he would be keen to revive the nuclear treaty with Iran, which was sealed during the Obama administration and later ditched by Trump, in a move that could dump an extra 2m barrels a day on to a fragile market.
Biden has said he would offer Tehran a ‘credible path back to diplomacy’ and the US would rejoin if Iran returns to ‘strict compliance’ with a deal.
Iman Nasseri, managing director for the Middle East consulting firm FGE, said: ‘Within a few months after a Biden election win, we expect some Iranian oil will be coming to market.’
Nasseri said this would be a ‘real headache for Opec’ countries, which will likely have to agree to cut their own production to help prop up prices.
Trump, on the other hand, slammed another round of sanctions on Iran last week, citing thecountry’s support of ‘terrorist entities’.
The present administration argues the proceeds from selling oil goes into paying Iran’s Islamic religious police.